Dutch Government Considers Reversing 30% Ruling Cuts
The Hague, Monday, 2 September 2024.
The Dutch government may reverse recent cuts to the 30% tax ruling for foreign workers in the upcoming September budget. This move aims to retain international talent, despite calls from some coalition parties for its abolition. The ruling may be adjusted to 27% instead of the previously planned sliding scale.
Background of the 30% Ruling
The 30% ruling is a tax advantage for highly skilled migrants working in the Netherlands, allowing employers to pay 30% of an employee’s salary as a tax-free allowance. This provision assists in offsetting extraterritorial costs and higher living expenses in the Netherlands. Initially, the 30% ruling was set to transition into a sliding scale—30% for the first 20 months, 20% for the next 20 months, and 10% for the final 20 months—starting from January 2024[1].
Reversal Decision and Economic Impact
The decision to potentially reverse the sliding scale changes, reducing the tax-free allowance to 27% instead, comes in response to concerns from businesses and economic experts. Companies had warned that further reductions would discourage firms from operating in the Netherlands, leading to a talent drain. An analysis for the finance ministry in June 2024 indicated that cutting back the tax break would result in 15% to 20% fewer highly-skilled migrants, thereby harming the economy[1].
Cabinet’s Position and Business Concerns
Despite some coalition parties, including Peter Omzigt’s NSC, advocating for the abolition of the 30% ruling, the cabinet decided to pull back on the proposed changes. The economic review by SEO highlighted that the 30% ruling was both effective and efficient, contributing positively to the Dutch economy. Business leaders, including those from prominent companies like ASML, have voiced their concerns about the hostile political environment towards foreign nationals and the negative repercussions it could have on their operations[2].
Upcoming Budget and Legislative Announcements
The annual budget, set to be presented on September 17, 2024, during Prinsjesdag, will include these proposed changes. Prime Minister Dick Schoof has indicated that the budget will also feature other economic measures such as a reduced real estate transfer tax and increased funding for school meal programs. The expected changes underscore the government’s attempt to balance fiscal responsibility with economic growth and social welfare[3].